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American Power and Policy

Author(s):Leeson, Robert
Reviewer(s):Domitrovic, Brian

Published by EH.NET (June 2011)

Robert Leeson, editor, American Power and Policy. New York: Palgrave Macmillan, 2009. viii + 278 pp. $100 (hardcover), ISBN: 978-1-4039-4956-1.

Reviewed for EH.Net by Brian Domitrovic, Department of History, Sam Houston State University.

If somehow one could concoct a ratio between the amount of economics and the amount of business in a given time and place, one thing would be clear. The ratio as it ran from the nineteenth to the twentieth century in the Anglophone world would take the shape of a hockey stick.

There was economics in the nineteenth century, to be sure, but it was an episodic and essayistic (if often luminous) affair. Business, however, was going absolutely gangbusters in Britain and the United States. In the first half of twentieth century, roles reversed. Economic growth met with variability, and economics exploded.

Why economics mushroomed in the twentieth century is an imperative historical question on several grounds. The phenomenon was large; it was sophisticated; and most probably, it was consequential. Getting a bead on the enormity of this discipline?s tremendous rise is very much not a trivial preoccupation, and it is in this spirit that Robert Leeson?s new edited collection in the series Archival Insights into the Evolution of Economics must be welcomed.

American Power and Policy is a compendium of case studies of some half-dozen major economists who broadly speaking put themselves in the public service in the 1930s and 1940s, though there is some treatment of the decades that follow. Some of the names are familiar (Marriner Eccles, Harry Dexter White), while others ring bells (Jacob Viner, Allyn Young, John H. Williams). The recurrent theme, one might say the pulse of the book, is that every one of these people was ensconced at the top places, from the premier universities, typically Harvard, to governmental posts near the pinnacle of power and influence. As Paul Samuelson said (if inexplicably) of one of influentials here canvassed, ?The world owes Lauchlin Currie a great debt. … Hail Caesar! Hail Nestor!? (p. 106)

Arguably the most important figure in the book is not one of the chapter subjects, but a recurrent name across the volume: Frank Taussig. Taussig, as American Economic Power and Policy repeatedly infers, was the anchor of the Harvard department which eventually did so much to place economists in positions of prominence. The other major force in the department was Young, an AEA president and (while at Cornell) Frank Knight?s advisor. Young remains unfamiliar to us only because his profound influence was mainly felt in the classroom. These two mentored any number of the high economic practitioners of the New Deal and Bretton Woods, above all Currie (who established the prototype of the CEA chair) and White (who, we learn to our amazement, failed his generals).

It was Taussig who over his long career bestrode the two vastly different worlds of economics — that of the nineteenth and twentieth centuries. In Taussig?s initial heyday, as he composed the Tariff History of the United States in the 1880s, the economist was very much a scribe who rather sat at the feet of businessmen and politicians and recorded the methods of their operations, if offering sage advice and abstracting a theory here and there. This was the golden era of historical political economy.

Yet the department in which Taussig was the grand old man four and five decades later was one which deliberately sought to rush its charges into the power nexus of the economy in order to perform emergency surgery, indeed to assume the role of prime mover. Clearly the Great War and the onset of the Depression had much to do with this remarkable turn of events, but there is more to it than that. The sense that haunts this volume is that the crisis years of 1919-1933 are when the profession realized that it could seize the moment; in turn, the profession proved that it had the outsized ambition required to do just that.

Economists, like scientists, have often taken a dismissive view toward archival research. If something is important and intellectually legitimate, surely it is in the published articles, the argument runs. This view has begun to lose its grip among economists, however, what with the exertions of the journal History of Political Economy and the enormous Economists? Papers Project at Duke University.

American Power and Policy does this change-of-heart good by identifying certain unpublished insights from these economists that ended up being remarkably prescient –and unheeded. In one exchange of letters between Viner and Keynes, the two agree in 1943 that the abundant talk of a dollar shortage was unfounded, and that the real problem that would stalk the world not on a full gold standard was inflation. This view was vindicated by events.

Then there is the exchange between Williams and Keynes (reprinted in the book), also of 1943, in which the former contends that in the postwar world, the United States will be disinclined to conduct economic policy such that domestic stability correlates with international equilibrium. In a few years, this view would be codified in the Triffin dilemma, the Samuelson-Tobin synthesis, and the ?impossible trinity.?

During a brief chapter on the 1970s, an archival source of Arthur Okun is quoted as follows: ?During those good old days, U.S. performance fit the Phillips curve like a glove!? (p. 99). The quotation is telling, in that it indicates the incredible primacy that theory had achieved by the latter decades of the twentieth century. Economic cogitation had become so developed, sophisticated, and institutionalized that it could became a source of disappointment — if not angst — if practical developments made favorite theories inoperative.

Okun could have only thrived in the 1960s and 1970s. A figure with experience at a top university (Yale), a top governmental post (CEA chair), and a top institution (Brookings) getting melancholy about the decline of a theory on account of news from the realm of the hurly-burly was unthinkable among economists of Frank Taussig?s early years. Yet somehow, within three quarters of the century — and ultimately this is the origin of this book?s fascination — economists had reached a point where as intellectuals they could make demands on the world of affairs.

Brian Domitrovic teaches at Sam Houston State University and is author of the history of supply-side economics, Econoclasts (2009).

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Subject(s):Economic Planning and Policy
History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII